Proposal Abstract for the oikos PhD Summer Academy in St Gallen, September 11-15, 2000

Feedback Impacting Added Value of Products in Cause Related Marketing

Mikael Alaviitala Department of Marketing University of Vaasa PO Box 700, 65101 VAASA Finland

Abstract The elementary idea of cause related marketing (CRM) is to support a social cause. The company or the consumer pays the cost and the society and company get the benefit. The personal benefits, such as rewards, are therefore not the key issue. The consumer chooses a CRM product because he wants the social goal to become reality. The question is whether he wants to know how the social issue develops and whether this information is decisive for the next purchasing decision. The purpose of this paper is to propose a research plan examining the connection between collective feedback and added value in a CRM context. The study focus on collective feedback as a possibility to increase the value of a CRM-product. The aim is to stress the conditions under which consumer behaviour is most likely to be modified by collectively given feedback.

2 Introduction Company support of social causes has grown drastically during the past decade and the total amount exceeds $1 billion in the United States alone (Smith & Stodghill 1994). Companies choose a cause-related marketing (CRM) strategy to promote the achievement of marketing objectives via company support of social causes (Barone 2000). The problem with CRM, as well as with social marketing, is that the results can not be seen immediately but only in the future. Several studies indicate that consumers have doubts about results, and question whether companies have a genuine interest in supporting social issues. Thus, there is obviously a need for information as a reinforcement of consumer behaviour.

There is surprisingly little research done

concerning frequently provided feedback information on received progress in a social cause supported by a company. At the best of my knowledge, the studies concerning frequently given feedback information all concentrate on individually given feedback.

This study is defined to take a brief look into the reinforcement-problem from an attitude/behaviour perspective, because collective feedback information probably affects consumers attitudes to quite a great extent. Considering the purpose of the study, there is no demand for a deeper understanding of the set of factors that conform consumer attitudes. As the aim of this study is to clarify the effect of public feedback information on consumers purchasing decisions under certain conditions, it may be convenient to use a stimulus/response approach.

This paper begins with a quick look at the relation between CRM and reinforcement. The aim is to determinate the theoretical context of the problem. In the second and third chapter consumers are divided into categories according to motivation and reinforcing pattern. The problems of social issues is considered in the fourth chapter. All the four first chapters together are aimed to state the reasons for believing that collective feedback information is relevant to be researched. The following part of the paper

3 concentrates on determinating the conditions increasing the possibility for collectively provided positive feedback to modify consumer behaviour. At the end of this paper preliminary thoughts about a possible experiment design are presented.

CRM and Reinforcement

Several studies show that a desired behavior can be influenced and maintained by reinforcement (Foxall 1995, Antonides & Van Raaij 1989, Martin & Pear1992). The behavior modification literature states that “if, in a given situation, somebody does something that is followed by a positive reinforcer, then that person is more likely to do the same thing again when he or she next encounters a similar situation ”- (Martin & Pear, 1992: 28). Thus, if a consumer chooses to buy a product and thereby supports a social issue, this behavior may be repeated by providing the customer positive reinforcement.

A company engaged in a CRM-campaign may start by specifying the final social goal, which could be reached trough a continuous row of subgoals (Martin & Pear 1992). In a situation of continuous support, for example organic food, the subgoals should be very clearly communicated to the consumers. The part goals are easier to reach and increase, therefore the controllability of causality between behavior and social effort. From a reinforcement point of view, immediate small reinforcers are argued to be sometimes even more effective than delayed stronger reinforcers (Martin & Pear 1992).

Communicating and specifying the final goal is usually quite well carried out by companies with a CRM-strategy. Mostly the communication expresses a prediction or promise of a remote better environment or social condition. In the beginning of a campaign, when there is no reults to be reported, marketers must convince consumers, especially the early adapters (Antonides & van Raaij 1998), of the genuine aim to reach a goal. The second challenge for the company is to reach the critical mass of consumers.

4 “The critical mass should not be reached too late, otherwise the early adopters may give up” (Antonides & van Raaij 1998: 367). In a CRM context, providing positive feedback information on how the subgoals have been reached might maintain the consumers’ interest in the product. The effect of extinction, when no reinforcement is provided, is that the behaviour may decrease to a very low level (Martin & Pearl 1992). It is, however, very important that receiving feedback information is easy for the consumer and that it doesn’t cause him or her neither financial nor time cost (Antonides & Van Raaij 1998).

Consumer Motivation

In a social marketing or cause related marketing context consumers can be divided into two groups depending on the reinforcement pattern: a) a consumer may be reinforced by a feeling of self-gratification or b) by realising the results of group behaviour (result orientation). The design of the feedback information is depending on which of the two categories motivates the receiver. A person motivated by self-gratification is probably pleased with himself after he has purchased organic milk or turned down the heat in the apartment. The knowledge whether the collective effort did change anything or not, may not deeply concern a person belonging to the self-gratification category. On the other hand, people belonging to the result oriented category may be more motivated by received information on results than by getting personal rewards. Uncertainty of other consumers’ behaviour and thereby received collective results may be the interfering factor that makes them not act in a socially or environmentally desired way. (The phenomena is often called “Social Dilemma” (van Raaij 1995) or “Prisoners Dilemma” (Uusitalo 1989).) Thus, there is a value in information concerning other consumers behaviour and collectively received results. This information could be used to convince potential consumers, belonging to the result orientated group, of the use of purchasing a cause related product. As a matter of fact, some people are so concerned about others

5 that even information about other peoples‘ intentions does strongly influence their choice, e.g., Gallup results influencing the choices in a public election. And consider how many would vote if the results never were told? The result orientated group might be large in number due to the fact that many consumers report a positive attitude against social issues but still don’t behave according to their attitudes. If a consumer belonging to the result oriented group decides to purchase a cause related product, he probably expects to see some results. If a company doesn’t continuously give feedback information on received results, the potential value added may decrease as an effect of extinction (Martin & Pearl 1992).

Personal and Collective Reinforcement

Reinforcement can be divided into two categories depending on whether it is personal (individual) or collective (Figure 1). The personal reinforcement is either hedonic or informational (Foxall, 1995). An example on hedonic reinforcement is the possibility to drive fast with your own car and an example on informative reinforcement is the energy bill. Some researchers argue that collective reinforcement might not be so effective in the western society: “In the atomistic, competitive “consumer society” where individual utility and individual success are much more emphasized than collective goals, there is a kind of “information bias” which makes it hard to create socially committed preferences and behavior without private side bets” (Uusitalo 1989: 272).

Collective reinforcement is a cognitively loaded message about a common responsibility. It can be a prompt saying “Don’t litter”or an advertisement convincing you about a certain products´ positive affect on the environment. The message is either recommendation to decrease the environmental harmful behaviour or to increase the positive behaviour e.g., purchasing eco-efficient products instead of conventional

6 products. The reinforcing factor is often just one’s own responsibility and the vision of a remote better environment.

Reinforcement may also be public information presenting results on several consumers` behaviour (figure 1).

Several studies indicate that consumers` have doubts about

results (Uusitalo 1986, Foxall, 1995: 263-264) and question whether companies have genuine interest in supporting a social issue (Barone, 2000). Despite this, a great part of the research done in the field concentrate on individually given feedback information (see for example Van Houwelingen& W. Van Raaij, 1989).

FIGURE 1. Classes of Reinforcement Motivating Consumer Behavior

REINFORCEMENT

PERSONAL

COLLECTIVE

Hedonic

Forecast of Consequences

Informational

Feedback on Results

7 Social Marketing and the Cause Related Marketing Concept

Cause related marketing (CRM) is a strategy designed to promote the achievement of marketing objectives (e.g., brand sales) via company support of social causes (Barone et.al., 2000: 248). CRM is in the grey zone between conventional and social marketing. The CRM- product is traded off like any conventional product but the social benefit linked to the product must be cognitively transformed into conventional terms in order to make the whole product comparative to the conventional alternatives. An example of transformation is when a consumer considers “how much is it worth for me that the packaging is made of recycled paper” or “do I believe that buying the “green” product makes sense”. There are obviously certain characters of social marketing that can be considered relevant in cause related marketing too.

i) Characteristic for a social product is that the society gets the benefits while the individual consumers pay the costs (e.g.,. separating waste or donating money to charity). In cause related marketing the decision to purchase comes from an individual need. The consumers’ prime interest is to satisfy their own need by buying a product or a service. Depending on the importance of the purchasing decision, the consumer collects much or hardly any information about the product alternatives (Barone 2000). The social cause supported by a company in order to add value to the product, is one among other attributes to be considered in the consumer`s trade-off process. Characteristic for both social marketing and CRM is the fact that if a person decides not to participate in the pro-social campaign or not to purchase a CRM-product, he or she can still enjoy the results (Uusitalo (1986) calls them free riders). In social marketing the benefit is dependent on how many consumers behave in the same way. If only a few consumers act pro-socially the results will be rather minimal. On the other hand, if the pro-social behaviour of consumers lead to results, then even those consumers not participating, can enjoy the benefits. Isaac, McCue & Plott (1985) argue that the more consumers sharing the social benefits, the harder it is to avoid ”free

8 riding”. Thus, feedback information on results from consumer behaviour might be more effective in a local context than in a context with numerous consumers.

ii) The social benefits of adapting a social idea cannot be seen immediately (Manrai & Gardner 1992). The same goes for the social benefit part of a CRM product. For people belonging to the personal gratification category, simply the knowledge of doing the right thing may be reinforcement enough. The result oriented persons are surely curious about the consequences and may ask themselves for example: “what was the demand for organic milk this week in relation to one month ago and how many kilos less fertilizers was theoretically spread out on the fields because of the change in demand?”.

iii) Controllability and intangibility are to some extent problems in CRM. It can be very difficult for a consumer to know whether a “green” product really is “greener” than the competitors` product. For example, how can a consumer know whether a organic cheese imported from the EU is more “green” than conventional local cheese. Or how can a consumer be sure that the company promising $1 per sold product to charity, really keeps that promise. The questions are very important because the value added to the product is depending on whether the results are perceived as uncontrollable and intangible by the consumer or not. Marketers in companies that engage in the CRM should use frequently given feedback information to make the ongoing process towards the social goal more visible and tangible.

CRM and Cost

The products in CRM can be divided into three categories depending on who pays the relative cost for the company’s engagement in a social issue (Figure 2). In many cases the competing brands are similar on substantive product features. For example a bank

9 offering similar interest on deposits, similar service and similar conditions for a loan. The only differencing factor is that the particular bank offers 0,2 % extra interest, by which environmental projects are supported. Barone (2000) uses the term “Interbrand homogeneity” for the situation where the CRM engaged company pays all the cost for the products link to a social issue. The second class is when both the consumer and the company pay the cost. For example, by purchasing a hamburger, which normal price is 30 mk, for 31 mk the hamburger restaurant promise to give 2 mk/hamburger to charity. The consumer does not necessarily pay a financial cost, it can also be paid in form of time, effort or lower performance of the product. The third class is where the consumer pays for the social function by accepting a lower performance and/or a higher price for a product with a social connection. The third class is in some literature called “interbrand heterogeneity” (Barone 2000). Consumers sensitiveness to collective feedback is depending on whether the company or the consumer pay the cost. In a case where all competing products are equal except for one having a “green” extra value, the sensitiveness to feedback information might be relatively low (figure 2. category 1). The consumers don’t have to pay neither financial nor time cost to receive the social value added to the product. This may decrease the involvement in the social issue and thus also the interest in information concerning possible achieved results. On the other hand, in category 3 (figure 2) the costs are paid by the consumer alone, which increases the involvement and interest in received results. Consequently, feedback information is more likely to have a positive effect on consumer behaviour in a case where the consumer pays at least a part of the cost (figure 2. categories 2 and 3). The fourth category in figure 2 shows a conventional product with no social issue connected.

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FIGURE 2. Social costs and CRM cost

1

2

3

4

category

cost paid by company cost paid by consumer

Other conditions crucial for success of collective feedback information

There are certain conditions under which it is expected that feedback information could lead to behaviour modification. One important condition is that postpurchase dissonance occur. Consumers tend to be more interested in collecting information, supporting their decision, in situation where they are not sure whether they did the right decision or not (Loudon & Della Bitta 1988). Dissonance is likely to be strongest for the purchase of durables, although it can exist for almost every purchase (Loudon et. al., 1988; 672). In the case of simple products and services, information search is more limited (Antonides & van Raaij 1998: 505)

11 Engel & Blackwell (1982) suggest that dissonance is likely to occur under the following conditions: 1. Once a minimum threshold of dissonance tolerance is passed. 2. The action is irrevocable. 3. Unselected alternatives have desirable features. 4. There are several desirable alternatives. The more you know the harder it is to make up your mind. 5. Available alternatives are quite dissimilar in their qualities (unique characteristics) 6. The buyer is committed to his decision because it has psychological significance, and reflections of one’s taste and life style. 7. There is no pressure applied to the consumer to make the decision.

Furthermore, the product should be of a kind the consumer buys frequently, to get use of the prepurchasing feedback information. It can, however, be a product seldom purchased but used over a long time, for example an eco-efficient car. It probable would reduce dissonance if the company marketing an eco-efficient car provided information like: “If every car in the city was as green as “Brand” the pollution level would decrease to the level of year 1953 - so far 4320 “Brand”-cars have been sold in the city”.

The source providing the feedback information is decisive for how reliable the message is perceived to be (Loudon & Della Bitta 1988). It probably would be more effective if the asthma foundation or a government owned research institute provided the figures in the eco-car example. There is, however, danger in using external sources because it might change the expected brand image.

12 Some basic thoughts about a possible experiment design

The effect of feedback information as a source of value adder may be measured in an experiment. The design of the empirical experiment should take into account at least two of the following aspects:

1. The hypothetic or real purchasing situation should cause dissonance. 2. At least a part of the social link should be paid by the consumer. 3. The hypothetic or real product should be of a kind that the consumer purchases, or at least uses, frequently. 4. The feedback information can be provided by the company or an external organization.

13 REFERENCE

Antonides, G. & Van Raaij W. F. (1998). Consumer Behaviour, A European Perspective. John Wiley & Sons Ltd, England Barone, Michael J., Miyazaki A. & Taylor K. (2000). The Influence of Cause-Related Marketing on Consumer Choice: Does One Good Turn Deserve Another? Journal of the Academy of Marketing Science. Volume 28, No. 2. Engel, James F. & Blackwell Roger D. (1982). Consumer Behavior, 4th ed., The Dryden Press New York. Foxall, R. Gordon (1995). Environment-Impacting Consumer Behavior: An Operant Analysis. Advances in Consumer Research, volume 22. Isaac, M., McCue, K. & Plott, C. (1985). Public Goods Provision in a Experimental Environment. Journal of Public Loudon, Daavid & Della Bitta Albert J. (1988). Consumer Behavior. Concepts an Applications. Third edition. McGraw-Hill Book Co. Singapore. Manrai, Lalita A. & Gardner, Meryl P. (1992). Consumer Processing of Social Ideas Advertising: A Conceptual model. Advances in Consumer Research, vol 19. Martin, Garry & Pear, Joseph (1992). Behavior Modification: What it is and how to do it. Prentice-Hall International Editions. Fourth Edition. Smith, Geoffrey & Stodghill III Ron (1994). Are Good Causes Good Marketing? Business Week, March 21. Uusitalo, Liisa (1986). Suomalaiset ja ympäristö. Tutkimus taloudellisen rationaalisuudesta. Helsingin kauppakorkeakoulu A:49.

käyttäytymisen

Uusitalo, Liisa (1989). Economic Man or Social Man - Exploring Free Riding in the Production of Collective Goods. Grunert, K. & Ölander, F (eds). Understanding economic behavior. Kluwer Academic Publishers, 267-283. Van Houwelingen Jeannet H. & W. F. Van Raaij (1989). The Effect of Goal-Setting and Daily Electronic Feedback on In-Home Energy Use. Journal of Consumer Research. Vol 16 (June). Van Raaij, W. Fred (1995). A Hierarchy of Excuses for Not Behaving in a Pro-environmental Way. Eivind Sto (ed.). National Institute for Consumer Research, Lysaker, Norway.